issue 1 - Roland Berger

DOSSIER #01 The formula for growth
nSANOFI-AVENTIS
The merger with Aventis in 2004 made
Sanofi-Synthélabo the third largest
pharmaceutical group in the world and
the market leader in Europe.
33% In the
year 2003 alone,
Sanofi boosted US
sales by one-third.
SOURCE: SANOFI-SYNTHÉLABO ANNUAL REPORT
»We want to grow in
the generic-drug
business—possibly
through making
acquisitions.«
JEAN-FRANÇOIS DEHECQ, CEO, SANOFI-AVENTIS
OPERATING PROFITS (in $ billion)
1.417
1.817
CAGR: 33 %
2.335
3.321
2000 2001 2002 2003
Between 2000 and 2003, Sanofi-
Synthélabo increased its midyear
operating result (CAGR—compound
annual growth rate) by 33 percent,
a figure achieved by a series of salesand-margin-strengthening
bestsellers
that the group developed in-house.
Farewell to the »V-curve«
GROWTH OR RESTRUCTURING? FOR TOP INTERNATIONAL COMPANIES, THIS IS NO LONGER
AN EITHER-OR QUESTION. SUSTAINED SUCCESS REQUIRES A TWO-PRONGED STRATEGY, ONE THAT
BOOSTS SALES WHILE SIGNIFICANTLY REDUCING COSTS AT THE SAME TIME.
s
SPEED IS WHAT DETERMINES the success of Canon,
the Japanese manufacturer of business machines and
cameras—at least when it comes to printer or copier
output, or to the shutter speeds of digital cameras.
However, at his upper-management meetings at 8
o’clock every morning, company president and CEO
Fujio Mitarai likes to slow things down. Half an hour
before official office hours, the Canon directors meet for
their daily session on the 17th floor of the Tokyo head
office, located on the banks of the Tama River. Over cups
of green tea, they talk about current issues not always
related to the world of big business. Mitarai says of his
seemingly outmoded leadership style, one that cultivates
easy conviviality and informal contacts, “Management
works only through communication. If you neglect
it, you can run the danger of losing touch with reality.”
AS AFFABLE AS MITARAI may appear in the tightestknit
of management circles, he shows himself to be all
the more unrelenting when he deals with the task
at hand. “The most important thing at Canon is profitability,”
is the 69 year-old’s credo. Accordingly, Mitarai
did not shy away from an iron-fisted management style
when he took up his present position in 1995. Within
five years, the new boss let go of the company’s seven
biggest money-losers, including the typewriter, personal
computer and LCD monitor businesses. “If a corporate
group wants to achieve stable growth, it has to carefully
select the business branches that are potentially
profitable, and focus all resources on those,” explains
Mitarai. Nevertheless his strategy was not limited to the
streamlining process. At the same time, he restructured
manufacturing processes and relieved overwhelmed
production assembly lines by making groups
responsible for their own work, an approach known
around Canon as “cell manufacturing.” The restructuring
not only increased employee motivation, it also
reduced operating costs by one-third. The result is that
fewer people now deliver a higher output, and they do
so with a lower rate of error.
THE RESULTS SPEAK for themselves. Over the past
decade Canon was among the companies around the
globe with the strongest growth in value. Between
1993 and 2003, the manufacturer of optoelectronic
devices and office equipment increased its earnings
before interest, taxes and amortizations (EBITA) by an
average of almost 12 percent annually. The secret of
this success is the company’s unconventional mixture
of goal orientation with a trust-based culture. For years
Mitarai traveled from one location to the next to explain
to employees the importance of entrepreneurial thinking
and acting at all levels of the company’s hierarchy.
These appeals would not have availed, however, had it
not been for an aspect of Canon’s corporate culture
called “kyosei.” This term roughly translates as “living
and working together for the common good.” The concept
also includes the company’s social obligations
and lifelong employment relationships, as well as the
personal commitment and continuous training of individual
employees. With this approach, Canon is achieving
what would have been considered unthinkable five
years ago: Pursuing the dreams of growth, without losing
sight of a strict earnings-oriented attitude. Mitarai
intends to continue in this direction. For 2005, the
head of Canon has assigned his people the objective of
achieving or defending market leadership in all core
business areas, and to continue unflinchingly along
the course of reducing costs.
FEW GROUPS HAVE BEEN ABLE to master the art of
combining steady growth with high profitability.
According to an analysis conducted by Roland Berger
Strategy Consultants, only one-quarter of the 1,700
largest companies in Asia, Europe and North America
were able to increase their profits more than their sales
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think: act